Chapter 4 Cases - Oblicon

7/31/2019 Chapter 4 Cases - Oblicon

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G.R. No. 133179 March 27, 2008

ALLIED BANKING CORPORATION, Petitioner,vs.LIM SIO WAN, METROPOLITAN BANK AND TRUST CO., and PRODUCERS BANK, Respondents.

D E C I S I O N

VELASCO, JR., J.:

To ingratiate themselves to their valued depositors, some banks at times bend over backwards that theyunwittingly expose themselves to great risks.

The Case

This Petition for Review on Certiorari under Rule 45 seeks to reverse the Court of Appeals (CAs) Decisionpromulgated on March 18, 1998 1 in CA-G.R. CV No. 46290 entitled Lim Sio Wan v. Allied Banking Corporation,et al. The CA Decision modified the Decision dated November 15, 1993 2 of the Regional Trial Court (RTC),Branch 63 in Makati City rendered in Civil Case No. 6757.

The Facts

The facts as found by the RTC and affirmed by the CA are as follows:

On November 14, 1983, respondent Lim Sio Wan deposited with petitioner Allied Banking Corporation (Allied)at its Quintin Paredes Branch in Manila a money market placement of PhP 1,152,597.35 for a term of 31 daysto mature on December 15, 1983 ,3 as evidenced by Provisional Receipt No. 1356 dated November 14, 1983 .4

On December 5, 1983, a person claiming to be Lim Sio Wan called up Cristina So, an officer of Allied, andinstructed the latter to pre- terminate Lim Sio Wans money market placement, to issue a managers checkrepresenting the proceeds of the placement, and to give the check to one Deborah Dee Santos who would pickup the check .5 Lim Sio Wan described the appearance of Santos so that So could easily identify her .6

Later, Santos arrived at the bank and signed the application form for a managers check to be issued .7 Thebank issued Managers Check No. 035669 for PhP 1,158,648.49, representing the proceeds of Lim Sio Wansmoney market placement in the name of Lim Sio Wan, as payee .8 The check was cross- checked "For PayeesAccount Only" and given to Santos .9

Thereafter, the managers check was d eposited in the account of Filipinas Cement Corporation (FCC) atrespondent Metropolitan Bank and Trust Co. (Metrobank) ,10 with the forged signature of Lim Sio Wan asindorser .11

Earlier, on September 21, 1983, FCC had deposited a money market placement for PhP 2 million withrespondent Producers Bank. Santos was the m oney market trader assigned to handle FCCs account .12 Suchdeposit is evidenced by Official Receipt No. 31756 813 and a Letter dated September 21, 1983 of Santosaddressed to Angie Lazo of FCC, acknowledging receipt of the placement .14 The placement matured onOctober 25, 1983 and was rolled-over until December 5, 1983 as evidenced by a Letter dated October 25,

1983 .15

When the placement matured, FCC demanded the payment of the proceeds of the placement .16

OnDecember 5, 1983, the same date that So received the phone call instructing her to pre-terminate Lim SioWans placement, the managers check in the name of Lim Sio Wan was deposited in the account of FCC,purportedly representing the proceeds of FCCs money market placement with Producers Bank .17 In otherwords, the Allied check was deposited with Metrobank in the account of FCC as Producers Banks payment of its obligation to FCC.

To clear the check and in compliance with the requirements of the Philippine Clearing House Corporation(PCHC) Rules and Regulations, Metrobank stamped a guaranty on the check, which reads: "All priorendorsements and/or lack of endorsement guaranteed. "18

The check was sent to Allied through the PCHC. Upon the presentment of the check, Allied funded the checkeven without checking the authenticity of Lim Sio Wans purported indorsement. Thus, the amount on the faceof the check was credited to the account of FCC .19

On December 9, 1983, Lim Sio Wan deposited with Allied a second money market placement to mature onJanuary 9, 1984 .20

On December 14, 1983, upon the maturity date of the first money market placement, Lim Sio Wan went toAllied to withdraw it .21 She was then informed that the placement had been pre-terminated upon herinstructions. She denied giving any instructions and receiving the proceeds thereof. She desisted from furthercomplaints when she was assured by the banks manager that her money would be recovered .22
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When Lim Sio Wans second placement matur ed on January 9, 1984, So called Lim Sio Wan to ask for thelatters instructions on the second placement. Lim Sio Wan instructed So to roll -over the placement for another30 days .23On January 24, 1984, Lim Sio Wan, realizing that the promise that her money would be recoveredwould not materialize, sent a demand letter to Allied asking for the payment of the first placement .24 Alliedrefused to pay Lim Sio Wan, claiming that the latter had authorized the pre-termination of the placement and itssubsequent release to Santos .25

Consequently, Lim Sio Wan filed with the RTC a Complaint dated February 13, 1984 26 docketed as Civil CaseNo. 6757 against Allied to recover the proceeds of her first money market placement. Sometime in February1984, she withdrew her second placement from Allied.

Allied filed a third party complain t27 against Metrobank and Santos. In turn, Metrobank filed a fourth partycomplain t28 against FCC. FCC for its part filed a fifth party complain t29 against Producers Bank. Summonseswere duly served upon all the parties except for Santos, who was no longer connected with Producers Bank .30

On May 15, 1984, or more than six (6) months after funding the check, Allied informed Metrobank that thesignature on the check was forged .31 Thus, Metrobank withheld the amount represented by the check fromFCC. Later on, Metrobank agreed to release the amount to FCC after the latter executed an Undertaking,promising to indemnify Metrobank in case it was made to reimburse the amount .32

Lim Sio Wan thereafter filed an amended complaint to include Metrobank as a party-defendant, along withAllied.33 The RTC admitted the amended complaint despite the opposition of Metrobank .34 Consequently,

Allieds third party complaint against Metrobank was converted into a cross -claim and the latters fourth partycomplaint against FCC was converted into a third party complaint .35

After trial, the RTC issued its Decision, holding as follows:

WHEREFORE, judgment is hereby rendered as follows:

1. Ordering defendant Allied Banking Corporation to pay plaintiff the amount of P1,158,648.49plus 12% interest per annum from March 16, 1984 until fully paid;

2. Ordering defendant Allied Bank to pay plaintiff the amount of P100,000.00 by way of moraldamages;

3. Ordering defendant Allied Bank to pay plaintiff the amount of P173,792.20 by way ofattorneys fees; and,

4. Ordering defendant Allied Bank to pay the costs of suit.

Defendant Allied Banks cross -claim against defendant Metrobank is DISMISSED.

Likewise defendant Metrobanks third -party complaint as against Filipinas Cement Corporation is DISMISSED.

Filipinas Cement Corporations fourth -party complaint against Producers Bank is also DISMISSED.

SO ORDERED .36

The Decision of the Court of Appeals

Allied appealed to the CA, which in turn issued the assailed Decision on March 18, 1998, modifying the RTCDecision, as follows:

WHEREFORE, premises considered, the decision appealed from is MODIFIED. Judgment is rendered orderingand sentencing defendant-appellant Allied Banking Corporation to pay sixty (60%) percent and defendant-appellee Metropolitan Bank and Trust Company forty (40%) of the amount of P1,158,648.49 plus 12% interestper annum from March 16, 1984 until fully paid . The moral damages, attorneys fees and costs of suit adjudgedshall likewise be paid by defendant-appellant Allied Banking Corporation and defendant-appellee MetropolitanBank and Trust Company in the same proportion of 60-40. Except as thus modified, the decision appealed fromis AFFIRMED.

SO ORDERED .37

Hence, Allied filed the instant petition.

The Issues

Allied raises the following issues for our consideration:
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The Honorable Court of Appeals erred in holding that Lim Sio Wan did not authorize [Allied] to pre-terminatethe initial placement and to deliver the check to Deborah Santos.

The Honorable Court of Appeals erred in absolving Producers Bank of any liability for the reimbursement ofamount adjudged demandable.

The Honorable Court of Appeals erred in holding [Allied] liable to the extent of 60% of amount adjudgeddemandable in clear disregard to the ultimate liability of Metrobank as guarantor of all endorsement on the

check, it being the collecting bank .38

The petition is partly meritorious.

A Question of Fact

Allied questions the finding of both the trial and appellate courts that Allied was not authorized to release theproceeds of Lim Sio Wans money market placement to Santos. Allied clearly raises a question of fact. Whenthe CA affirms the findings of fact of the RTC, the factual findings of both courts are binding on this Court .39

We also agree with the CA when it said that it could not disturb the trial courts findings on the credibility of witness So inasmuch as it was the trial court that heard the witness and had the opportunity to observe closelyher deportment and manner of testifying. Unless the trial court had plainly overlooked facts of substance or

value, which, if considered, might affect the result of the case ,40

we find it best to defer to the trial court onmatters pertaining to credibility of witnesses.

Additionally, this Court has held that the matter of negligence is also a factual question .41 Thus, the finding ofthe RTC, affirmed by the CA, that the respective parties were negligent in the exercise of their obligations isalso conclusive upon this Court.

The Liability of the Parties

As to the liability of the parties, we find that Allied is liable to Lim Sio Wan. Fundamental and familiar is thedoctrine that the relationship between a bank and a client is one of debtor-creditor.

Articles 1953 and 1980 of the Civil Code provide:

Art. 1953. A person who receives a loan of money or any other fungible thing acquires the ownership thereof,and is bound to pay to the creditor an equal amount of the same kind and quality.

Art. 1980. Fixed, savings, and current deposits of money in banks and similar institutions shall be governed bythe provisions concerning simple loan.

Thus, we have ruled in a line of cases that a bank deposit is in the nature of a simple loan or mutuum .42 Moresuccinctly, in Citibank, N.A. (Formerly First National City Bank) v. Sabeniano, this Court ruled that a moneymarket placement is a simple loan or mutuum .43 Further, we defined a money market in Cebu InternationalFinance Corporation v. Court of Appeals, as follows:

[A] money market is a market dealing in standardized short-term credit instruments (involving large amounts)where lenders and borrowers do not deal directly with each other but through a middle man or dealer in openmarket. In a money market transaction, the investor is a lender who loans his money to a borrower through amiddleman or dealer.

In the case at bar, the money market transaction between the petitioner and the private respondent is in thenature of a loan .44

Lim Sio Wan, as creditor of the bank for her money market placement, is entitled to payment upon her request,or upon maturity of the placement, or until the bank is released from its obligation as debtor. Until any suchevent, the obligation of Allied to Lim Sio Wan remains unextinguished.

Art. 1231 of the Civil Code enumerates the instances when obligations are considered extinguished, thus:

Art. 1231. Obligations are extinguished:

(1) By payment or performance;

(2) By the loss of the thing due;

(3) By the condonation or remission of the debt;
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(4) By the confusion or merger of the rights of creditor and debtor;

(5) By compensation;

(6) By novation.

Other causes of extinguishment of obligations, such as annulment, rescission, fulfillment of a resolutorycondition, and prescription, are governed elsewhere in this Code. (Emphasis supplied.)

From the factual findings of the trial and appellate courts that Lim Sio Wan did not authorize the release of hermoney market placement to Santos and the bank had been negligent in so doing, there is no question that theobligation of Allied to pay Lim Sio Wan had not been extinguished. Art. 1240 of the Code states that "paymentshall be made to the person in whose favor the obligation has been constituted, or his successor in interest, orany person authorized to receive it." As commented by Arturo Tolentino:

Payment made by the debtor to a wrong party does not extinguish the obligation as to the creditor, if there is nofault or negligence which can be imputed to the latter. Even when the debtor acted in utmost good faith and bymistake as to the person of his creditor, or through error induced by the fraud of a third person, the payment toone who is not in fact his creditor, or authorized to receive such payment, is void, except as provided in Article1241. Such payment does not prejudice the creditor, and accrual of interest is not suspended by it .45 (Emphasissupplied.)

Since there was no effective payment of Lim Sio Wans money market placement, the bank still has anobligation to pay her at six percent (6%) interest from March 16, 1984 until the payment thereof.

We cannot, however, say outright that Allied is solely liable to Lim Sio Wan.

Allied claims that Metrobank is the proximate cause of the loss of Lim Sio Wans money. It points out thatMetrobank gua ranteed all prior indorsements inscribed on the managers check, and without Metrobanksguarantee, the present controversy would never have occurred. According to Allied:

Failure on the part of the collecting bank to ensure that the proceeds of the check is paid to the proper party is,aside from being an efficient intervening cause, also the last negligent act, x x x contributory to the injurycaused in the present case, which thereby leads to the conclusion that it is the collecting bank, Metrobank that

is the proximate cause of the alleged loss of the plaintiff in the instant case .46

We are not persuaded.

Proximate cause is "that cause, which, in natural and continuous sequence, unbroken by any efficientintervening cause, produces the injury and without which the result would not have occurred. "47 Thus, there isan efficient supervening event if the event breaks the sequence leading from the cause to the ultimate result.To determine the proximate cause of a controversy, the question that needs to be asked is: If the event did nothappen, would the injury have resulted? If the answer is NO, then the event is the proximate cause.

In the instant case, Allied avers that even if it had not issued the check payment, the money represented by thecheck would still be lost because of Metrobanks negligence in indorsing the check without verifying thegenuineness of the indorsement thereon.

Section 66 in relation to Sec. 65 of the Negotiable Instruments Law provides:

Section 66. Liability of general indorser. Every indorser who indorses without qualification, warrants to allsubsequent holders in due course;

a) The matters and things mentioned in subdivisions (a), (b) and (c) of the next precedingsection; and

b) That the instrument is at the time of his indorsement valid and subsisting;

And in addition, he engages that on due presentment, it shall be accepted or paid, or both, as the case may beaccording to its tenor, and that if it be dishonored, and the necessary proceedings on dishonor be duly taken,

he will pay the amount thereof to the holder, or to any subsequent indorser who may be compelled to pay it.

Section 65. Warranty where negotiation by delivery, so forth. Every person negotiating an instrument bydelivery or by a qualified indorsement, warrants:

a) That the instrument is genuine and in all respects what it purports to be;

b) That he has a good title of it;
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c) That all prior parties had capacity to contract;

d) That he has no knowledge of any fact which would impair the validity of the instrument orrender it valueless.

But when the negotiation is by delivery only, the warranty extends in favor of no holder other than theimmediate transferee.

The provisions of subdivision (c) of this section do not apply to persons negotiating public or corporationsecurities, other than bills and notes. (Emphasis supplied.)

The warranty "that the instrument is genuine and in all respects what it purports to be" covers all the defects inthe instrument affecting the validity thereof, including a forged indorsement. Thus, the last indorser will be liablefor the amount indicated in the negotiable instrument even if a previous indorsement was forged. We held in aline of cases that "a collecting bank which indorses a check bearing a forged indorsement and presents it to thedrawee bank guarantees all prior indorsements, including the forged indorsement itself, and ultimately shouldbe held liable therefor. "48

However, this general rule is subject to exceptions. One such exception is when the issuance of the check itselfwas attended with negligence. Thus, in the cases cited above where the collecting bank is generally held liable,in two of the cases where the checks were negligently issued, this Court held the institution issuing the check

just as liable as or more liable than the collecting bank.

In isolated cases where the checks were deposited in an account other than that of the payees on the strengthof forged indorsements, we held the collecting bank solely liable for the whole amount of the checks involvedfor having indorsed the same. In Republic Bank v. Ebrada ,49 the check was properly issued by the Bureau ofTreasury. While in Banco de Oro Savings and Mortgage Bank (Banco de Oro) v. Equitable BankingCorporation ,50 Banco de Oro admittedly issued the checks in the name of the correct payees. And in TradersRoyal Bank v. Radio Philippines Network, Inc. ,51 the checks were issued at the request of Radio PhilippinesNetwork, Inc. from Traders Royal Bank. 1avvphi1

However, in Bank of the Philippine Islands v. Court of Appeals, we said that the drawee bank is liable for 60%of the amount on the face of the negotiable instrument and the collecting bank is liable for 40%. We also notedthe relative negligence exhibited by two banks, to wit:

Both banks were negligent in the selection and supervision of their employees resulting in the encashment ofthe forged checks by an impostor. Both banks were not able to overcome the presumption of negligence in theselection and supervision of their employees. It was the gross negligence of the employees of both bankswhich resulted in the fraud and the subsequent loss. While it is true that peti tioner BPIs negligence may havebeen the proximate cause of the loss, respondent CBCs negligence contributed equally to the success of theimpostor in encashing the proceeds of the forged checks. Under these circumstances, we apply Article 2179 ofthe Civil Code to the effect that while respondent CBC may recover its losses, such losses are subject tomitigation by the courts. ( See Phoenix Construction Inc. v. Intermediate Appellate Courts, 148 SCRA 353[1987]).

Considering the comparative negligence of the two (2) banks, we rule that the demands of substantial justiceare satisfied by allocating the loss of P2,413,215.16 and the costs of the arbitration proceeding in the amount ofP7,250.00 and the cost of litigation on a 60-40 ratio .52

Similarly, we ruled in Associated Bank v. Court of Appeals that the issuing institution and the collecting bankshould equally share the liability for the loss of amount represented by the checks concerned due to thenegligence of both parties:

The Court finds as reasonable, the proportionate sharing of fifty percent-fifty percent (50%-50%). Due to thenegligence of the Province of Tarlac in releasing the checks to an unauthorized person (Fausto Pangilinan), inallowing the retired hospital cashier to receive the checks for the payee hospital for a period close to threeyears and in not properly ascertaining why the retired hospital cashier was collecting checks for the payeehospi tal in addition to the hospitals real cashier, respondent Province contributed to the loss amounting toP203,300.00 and shall be liable to the PNB for fifty (50%) percent thereof. In effect, the Province of Tarlac canonly recover fifty percent (50%) of P203,300.00 from PNB.

The collecting bank, Associated Bank, shall be liable to PNB for fifty (50%) percent of P203,300.00. It is liableon its warranties as indorser of the checks which were deposited by Fausto Pangilinan, having guaranteed thegenuineness of all prior indorsements, including that of the chief of the payee hospital, Dr. Adena Canlas.

Associated Bank was also remiss in its duty to ascertain the genuineness of the payees indorsement . 53

A reading of the facts of the two immediately preceding cases would reveal that the reason why the bank orinstitution which issued the check was held partially liable for the amount of the check was because of thenegligence of these parties which resulted in the issuance of the checks.
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In the instant case, the trial court correctly found Allied negligent in issuing the managers check and intransmitting it to Santos without even a written authorization .54 In fact, Allied did not even ask for the certificateevidencing the money market placement or call up Lim Sio Wan at her residence or office to confirm herinstructions . Both actions could have prevented the whole fraudulent transaction from unfolding. Alliedsnegligence must be considered as the proximate cause of the resulting loss.

To reiterate, had Allied exercised the diligence due from a financial institution, the check would not have beenissued and no loss of funds would have resulted. In fact, there would have been no issuance of indorsementhad there been no check in the first place.

The liability of Allied, however, is concurrent with that of Metrobank as the last indorser of the check. WhenMetrobank indorsed the check in compliance with the PCHC Rules and Regulation s 55 without verifying theauthenticity of Lim Sio Wans indorsement and when it accepted the check despite the fact that it was cross -checked payable to payees account only ,56 its negligent and cavalier indorsement contributed to the easierrelease of Lim Sio Wans money and perpetuation of the fraud. Given the relative participation of Allied andMetrobank to the instant case, both banks cannot be adjudged as equally liable. Hence, the 60:40 ratio of theliabilities of Allied and Metrobank, as ruled by the CA, must be upheld.

FCC, having no participation in the negotiation of the check and in the forgery of Lim Sio Wans indorsement,can raise the real defense of forgery as against both banks .57

As to Producers Bank, Allied Banks argument that Producers Bank must be held liable as employer of Santosunder Art. 2180 of the Civil Code is erroneous. Art. 2180 pertains to the vicarious liability of an employer forquasi-delicts that an employee has committed. Such provision of law does not apply to civil liability arising fromdelict.

One also cannot apply the principle of subsidiary liability in Art. 103 of the Revised Penal Code in the instantcase. Such liability on the part of the employer for the civil aspect of the criminal act of the employee is basedon the conviction of the employee for a crime. Here, there has been no conviction for any crime.

As to the claim that there was unjust enrichment on the part of Producers Bank, the same is correct. Alliedcorrectly claims in its petition that Producers Bank should reimburse Allied for whatever judgment that may berendered against it pursuant to Art. 22 of the Civil Code, which provides: "Every person who through an act ofperformance by another, or any other means, acquires or comes into possession of something at the expenseof the latter without just cause or legal ground, shall return the same to him." 1avvphi1

The above provision of law was clarified in Reyes v. Lim, where we ruled that "[t]here is unjust enrichmentwhen a person unjustly retains a benefit to the loss of another, or when a person retains money or property ofanother against the fundamental principles of justice, equity and good conscience. "58

In Tamio v. Ticson, we further clarified the principle of unjust enrichment, thus: "Under Article 22 of the CivilCode, there is unjust enrichment when (1) a person is unjustly benefited, and (2) such benefit is derived at theexpense of or with damages to another. "59

In the i nstant case, Lim Sio Wans money market placement in Allied Bank was pre -terminated and withdrawnwithout her consent. Moreover, the proceeds of the placement were deposited in Producers Banks account inMetrobank without any justification. In other words , there is no reason that the proceeds of Lim Sio Wansplacement should be deposited in FCCs account purportedly as payment for FCCs money market placement

and interest in Producers Bank.lavvphil

With such payment, Producers Banks indebtedness to FCC w asextinguished, thereby benefitting the former. Clearly, Producers Bank was unjustly enriched at the expense ofLim Sio Wan. Based on the facts and circumstances of the case, Producers Bank should reimburse Allied andMetrobank for the amounts the two latter banks are ordered to pay Lim Sio Wan.

It cannot be validly claimed that FCC, and not Producers Bank, should be considered as having been unjustlyenriched. It must be remembered that FCCs money market placement with Producers Bank was already dueand demandable; thus, Producers Banks payment thereof was justified. FCC was entitled to such payment. Asearlier stated, the fact that the indorsement on the check was forged cannot be raised against FCC which wasnot a part in any stage of the negotiation of the check. FCC was not unjustly enriched.

From the facts of the instant case, we see that Santos could be the architect of the entire controversy.Unfortunately, since summons had not been served on Santos, the courts have not acquired jurisdiction overher .60 We, therefore, cannot ascribe to her liability in the instant case.

Clearly, Producers Bank must be held liable to Allied and Metrobank for the amount of the check plus 12%interest per annum, moral damages, attorneys fees, and costs of suit which Allied and Metrobank are adjudgedto pay Lim Sio Wan based on a proportion of 60:40.

WHEREFORE, the petition is PARTLY GRANTED. The March 18, 1998 CA Decision in CA-G.R. CV No. 46290and the November 15, 1993 RTC Decision in Civil Case No. 6757 are AFFIRMED with MODIFICATION.
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Thus, the CA Decision is AFFIRMED, the fallo of which is reproduced, as follows:

WHEREFORE, premises considered, the decision appealed from is MODIFIED. Judgment is rendered orderingand sentencing defendant-appellant Allied Banking Corporation to pay sixty (60%) percent and defendant-appellee Metropolitan Bank and Trust Company forty (40%) of the amount of P1,158,648.49 plus 12% interestper annum from March 16, 1984 until fully paid. The moral damages, attorneys fees and costs of suit adjudgedshall likewise be paid by defendant-appellant Allied Banking Corporation and defendant-appellee MetropolitanBank and Trust Company in the same proportion of 60-40. Except as thus modified, the decision appealed fromis AFFIRMED.

SO ORDERED.

Additionally and by way of MODIFICATION, Producers Bank is hereby ordered to pay Allied and Metrobank theaforementioned amounts. The liabilities of the parties are concurrent and independent of each other.

SO ORDERED.


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G.R. No. L-41764 December 19, 1980

NEW PACIFIC TIMBER & SUPPLY COMPANY, INC., petitioner,vs.HON. ALBERTO V. SENERIS, RICARDO A. TONG and EX-OFFICIO SHERIFF HAKIM S.ABDULWAHID, respondents.

CONCEPCION JR., J.:

A petition for certiorari with preliminary injunction to annul and/or modify the order of the Court of First Instanceof Zamboanga City (Branch ii) dated August 28, 1975 denying petitioner's Ex-Parte Motion for Issuance ofCertificate Of Satisfaction Of Judgment.

Herein petitioner is the defendant in a complaint for collection of a sum of money filed by the privaterespondent. 1On July 19, 1974, a compromise judgment was rendered by the respondent Judge in accordancewith an amicable settlement entered into by the parties the terms and conditions of which, are as follows:

(1) That defendant will pay to the plaintiff the amount of Fifty Four Thousand Five HundredPesos (P54,500.00) at 6% interest per annum to be reckoned from August 25, 1972;

(2) That defendant will pay to the plaintiff the amount of Six Thousand Pesos (P6,000.00) asattorney's fees for which P5,000.00 had been acknowledged received by the plaintiff underConsolidated Bank and Trust Corporation Check No. 16-135022 amounting to P5,000.00leaving a balance of One Thousand Pesos (P1,000.00);

(3) That the entire amount of P54,500.00 plus interest, plus the balance of P1,000.00 forattorney's fees will be paid by defendant to the plaintiff within five months from today, July 19,1974; and

(4) Failure one the part of the defendant to comply with any of the above-conditions, a writ ofexecution may be issued by this Court for the satisfaction of the obligation. 2

For failure of the petitioner to comply with his judgment obligation, the respondent Judge, upon motion of theprivate respondent, issued an order for the issuance of a writ of execution on December 21, 1974. Accordingly,writ of execution was issued for the amount of P63,130.00 pursuant to which, the Ex-Officio Sheriff levied uponthe following personal properties of the petitioner, to wit:

(1) Unit American Lathe 24

(1) Unit American Lathe 18 Cracker Wheeler

(1) Unit Rockford Shaper 24

and set the auction sale thereof on January 15, 1975. However, prior to January 15, 1975, petitioner depositedwith the Clerk of Court, Court of First Instance, Zamboanga City, in his capacity as Ex-Officio Sheriff of

Zamboanga City, the sum of P63,130.00 for the payment of the judgment obligation, consisting of the following:

1. P50.000.00 in Cashier's Check No. S-314361 dated January 3, 1975 of the EquitableBanking Corporation; and

2. P13,130.00 incash. 3

In a letter dated January 14, 1975, to the Ex-Officio Sheriff, 4 private respondent through counsel, refused toaccept the check as well as the cash deposit. In the 'same letter, private respondent requested the scheduledauction sale on January 15, 1975 to proceed if the petitioner cannot produce the cash. However, the scheduledauction sale at 10:00 a.m. on January 15, 1975 was postponed to 3:00 o'clock p.m. of the same day due tofurther attempts to settle the case. Again, the scheduled auction sale that afternoon did not push throughbecause of a last ditch attempt to convince the private respondent to accept the check. The auction sale was

then postponed on the following day, January 16, 1975 at 10:00 o'clock a.m.5

At about 9:15 a.m., on January16, 1975, a certain Mr. Taedo representing the petitioner appeared in the office of the Ex-Officio Sheriff andthe latter reminded Mr. Taedo that the auction sale would proceed at 10:00 o'clock. At 10:00 a.m., Mr. Taedoand Mr. Librado, both representing the petitioner requested the Ex-Officio Sheriff to give them fifteen minuteswithin which to contract their lawyer which request was granted. After Mr. Taedo and Mr. Librado failed toreturn, counsel for private respondent insisted that the sale must proceed and the Ex-Officio Sheriff proceededwith the auction sale. 6 In the course of the proceedings, Deputy Sheriff Castro sold the levied properties itemby item to the private respondent as the highest bidder in the amount of P50,000.00. As a result thereof, theEx-Officio Sheriff declared a deficiency of P13,130.00. 7 Thereafter, on January 16, 1975, the Ex-Officio Sheriff


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issued a "Sheriff's Certificate of Sale" in favor of the private respondent, Ricardo Tong, married to PascualaTong for the total amount of P50,000.00 only. 8 Subsequently, on January 17, 1975, petitioner filed an ex- parte motion for issuance of certificate of satisfaction of judgment. This motion was denied by the respondentJudge in his order dated August 28, 1975. In view thereof, petitioner now questions said order by way of thepresent petition alleging in the main that said respondent Judge capriciously and whimsically abused hisdiscretion in not granting the motion for issuance of certificate of satisfaction of judgment for the followingreasons: (1) that there was already a full satisfaction of the judgment before the auction sale was conductedwith the deposit made to the Ex-Officio Sheriff in the amount of P63,000.00 consisting of P50,000.00 inCashier's Check and P13,130.00 in cash; and (2) that the auction sale was invalid for lack of proper notice tothe petitioner and its counsel when the Ex-Officio Sheriff postponed the sale from June 15, 1975 to January 16,1976 contrary to Section 24, Rule 39 of the Rules of Court. On November 10, 1975, the Court issued atemporary restraining order enjoining the respondent Ex-Officio Sheriff from delivering the personal propertiessubject of the petition to Ricardo A. Tong in view of the issuance of the "Sheriff Certificate of Sale."

We find the petition to be impressed with merit.

The main issue to be resolved in this instance is as to whether or not the private respondent can validly refuseacceptance of the payment of the judgment obligation made by the petitioner consisting of P50,000.00 inCashier's Check and P13,130.00 in cash which it deposited with the Ex-Officio Sheriff before the date of thescheduled auction sale. In upholding private respondent's claim that he has the right to refuse payment by

means of a check, the respondent Judge cited the following:

Section 63 of the Central Bank Act:

Sec. 63. Legal Character. Checks representing deposit money do not have legal tenderpower and their acceptance in payment of debts, both public and private, is at the option ofthe creditor, Provided, however, that a check which has been cleared and credited to theaccount of the creditor shall be equivalent to a delivery to the creditor in cash in an amountequal to the amount credited to his account.

Article 1249 of the New Civil Code:

Art. 1249. The payment of debts in money shall be made in the currency stipulated, and if itis not possible to deliver such currency, then in the currency which is legal tender in thePhilippines.

The delivery of promissory notes payable to order, or bills of exchange or other mercantiledocuments shall produce the effect of payment only when they have been cashed, or whenthrough the fault of the creditor they have been impaired.

In the meantime, the action derived from the original obligation shall be held in abeyance.

Likewise, the respondent Judge sustained the contention of the private respondent that he has the right torefuse payment of the amount of P13,130.00 in cash because the said amount is less than the judgmentobligation, citing the following Article of the New Civil Code:

Art. 1248. Unless there is an express stipulation to that effect, the creditor cannot becompelled partially to receive the presentations in which the obligation consists. Neither may

the debtor be required to make partial payment.

However, when the debt is in part liquidated and in part unliquidated, the creditor maydemand and the debtor may effect the payment of the former without waiting for theliquidation of the latter.

It is to be emphasized in this connection that the check deposited by the petitioner in the amount of P50,000.00is not an ordinary check but a Cashier's Check of the Equitable Banking Corporation, a bank of good standingand reputation. As testified to by the Ex-Officio Sheriff with whom it has been deposited, it is a certified crossedcheck. 9 It is a well-known and accepted practice in the business sector that a Cashier's Check is deemed ascash. Moreover, since the said check had been certified by the drawee bank, by the certification, the fundsrepresented by the check are transferred from the credit of the maker to that of the payee or holder, and for allintents and purposes, the latter becomes the depositor of the drawee bank, with rights and duties of one insuch situation. 10Where a check is certified by the bank on which it is drawn, the certification is equivalent toacceptance. 11 Said certification "implies that the check is drawn upon sufficient funds in the hands of thedrawee, that they have been set apart for its satisfaction, and that they shall be so applied whenever the checkis presented for payment. It is an understanding that the check is good then, and shall continue good, and thisagreement is as binding on the bank as its notes in circulation, a certificate of deposit payable to the order ofthe depositor, or any other obligation it can assume. The object of certifying a check, as regards both parties, is to enable the holder to use it as money ." 12 When the holder procures the check to be certified, "the checkoperates as an assignment of a part of the funds to the creditors." 13 Hence, the exception to the ruleenunciated under Section 63 of the Central Bank Act to the effect "that a check which has been cleared andcredited to the account of the creditor shall be equivalent to a delivery to the creditor in cash in an amount


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equal to the amount credited to his account" shall apply in this case. Considering that the whole amountdeposited by the petitioner consisting of Cashier's Check of P50,000.00 and P13,130.00 in cash covers the

judgment obligation of P63,000.00 as mentioned in the writ of execution, then, We see no valid reason for theprivate respondent to have refused acceptance of the payment of the obligation in his favor. The auction sale,therefore, was uncalled for. Furthermore, it appears that on January 17, 1975, the Cashier's Check was evenwithdrawn by the petitioner and replaced with cash in the corresponding amount of P50,000.00 on January 27,1975 pursuant to an agreement entered into by the parties at the instance of the respondent Judge. However,the private respondent still refused to receive the same. Obviously, the private respondent is more interested inthe levied properties than in the mere satisfaction of the judgment obligation. Thus, petitioner's motion for theissuance of a certificate of satisfaction of judgment is clearly meritorious and the respondent Judge gravelyabused his discretion in not granting the same under the circumstances.

In view of the conclusion reached in this instance, We find no more need to discuss the ground relied in thepetition.

It is also contended by the private respondent that Appeal and not a special civil action for certiorari is theproper remedy in this case, and that since the period to appeal from the decision of the respondent Judge hasalready expired, then, the present petition has been filed out of time. The contention is untenable. The decisionof the respondent Judge in Civil Case No. 250 (166) has long become final and executory and so, the same isnot being questioned herein. The subject of the petition at bar as having been issued in grave abuse ofdiscretion is the order dated August 28, 1975 of the respondent Judge which was merely issued in execution ofthe said decision. Thus, even granting that appeal is open to the petitioner, the same is not an adequate and

speedy remedy for the respondent Judge had already issued a writ of execution.14

WHEREFORE, in view of all the foregoing, judgment is hereby rendered:

1. Declaring as null and void the order of the respondent Judge dated August 28, 1975;

2. Declaring as null and void the auction sale conducted on January 16, 1975 and the certificate of sale issuedpursuant thereto;

3. Ordering the private respondent to accept the sum of P63,130.00 under deposit as payment of the judgmentobligation in his favor;

4. Ordering the respondent Judge and respondent Ex-Officio Sheriff to release the levied properties to theherein petitioner.

The temporary restraining order issued is hereby made permanent.

Costs against the private respondent.

SO ORDERED.

Barredo (Chairman), Aquino, Abad Santos and De Castro, JJ., concur.


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G.R. No. 153134 June 27, 2006

BANCO FILIPINO SAVINGS AND MORTGAGE BANK, Petitioner,vs.ANTONIO G. DIAZ and ELSIE B. DIAZ, Respondents.

D E C I S I O N

CALLEJO, SR., J.:

Before the Court is the Petition for Review on Certiorari filed by Banco Filipino Savings and Mortgage Bank ofthe Decision 1 dated November 12, 2001 of the Court of Appeals (CA) in CA-G.R. SP No. 64475 allowingrespondents spouses Antonio and Elsie Diaz to withdraw their deposit on consignation in the amountof P1,034,600.00 2 held by the Regional Trial Court (RTC) of Makati City, Branch 61. The assailed decision

reversed and set aside the orders of the said lower court which had denied the respondents' motion towithdraw deposit. Likewise assailed is the Resolution of April 12, 2002 of the appellate court denying thereconsideration of the assailed decision.

The present case is an offshoot of the CA Decisio n 3 of October 31, 1990 in CA-G.R. SP No. 21089 andDecision 4of November 14, 1997 in CA-G.R. CV No. 42899, both of which had already become final andexecutory. As culled therefrom and from the pleadings filed by the parties in the present case, the factual andprocedural antecedents are as follows:

On March 8, 1979, spouses Antonio and Elsie Diaz (the respondents) secured a loan from Banco FilipinoSavings and Mortgage Bank (petitioner bank) in the amount of P400,000.00 bearing an interest rate of 16% per

annum. In November 1982, the said loan was restructured or consolidated in the increased amountof P3,163,000.00 payable within a period of 20 years at an interest rate of 21% per annum. The obligation was

to be paid in equal monthly amortization of P56,227.00, and secured by a real estate mortgage over two

commercial lots situated at Bolton and Bonifacio Streets in Davao City. As additional collateral, the respondentsassigned the rentals on the mortgaged properties in favor of petitioner bank.

Despite repeated demands made on them, the respondents defaulted in the payment of their obligationbeginning October 1986. Before petitioner bank could institute the proceedings to foreclose on the mortgagedproperties, the respondents filed with the RTC of Davao City a complaint for "Declaration of Interest Rates andPenalty Charges as Unconscionable and Its Reduction, Reformation of Contract, Annulment of Assignment ofRentals, Damages and Attorney's Fees with Injunction," docketed as Civil Case No. 17840. The RTC of DavaoCity (Branch 12) denied the application for the issuance of a writ of preliminary injunction. It held that, byrespondent Antonio Diaz' own admission, the respondents had been remiss in paying the amortization asagreed upon in the contract; hence, the conditions in the real estate mortgage contract had been violated. Assuch, petitioner bank could rightfully foreclose the mortgaged properties. On appeal by the respondentspouses, the CA, in its Decision of October 31, 1990 in CA-G.R. SP No. 21089, affirmed the said Order of theRTC of Davao City.

Thereafter, the respondents filed another complaint with the RTC of Makati City for "Consignation andDeclaration of Cancellation of Obligation, with Prayer for Issuance of a Preliminary Injunction and TemporaryRestraining Order." The case was docketed as Civil Case No. 91-3090, and raffled to Branch 61 of the saidRTC. For failure to file its answer, petitioner bank was declared in default. In addition to the facts established inthe previous case, the RTC of Makati City, based on the ex parte evidence of the respondents, made thefinding that during the period of January 3, 1983 and January 25, 1985, when petitioner bank was orderedclosed by the Central Bank, the respondents paid a total amount of P1,311,308.48. Further, as of January 25,

1985, the respondents' total obligation amounted to P3,391,501.99. The respondents made additional

payments from February 11, 1985 until September 1991 amounting to P2,356,910.00. If these additional

payments were to be applied to the principal, the remaining balance would only be P1,034,600.00 as of

September 16, 1991. The respondents tried to settle their account by tendering the sum of P1,034,600.00 as

full payment of their loan obligation. However, petitioner bank, through its then Liquidator Ricardo P. Lirio,refused to accept the said amount. According to petitioner bank, the respondents' obligation at that timeamounted to P10,160,649.13.

The respondents then deposited by way of consignation with the RTC of Makati City, a manager's check datedDecember 5, 1991, in the amount of P1,034,600.00 as full payment of their loan obligation. Petitioner bank was

duly informed of such consignation.

In its Decision dated March 6, 1992, the RTC of Makati City ruled that the respondents' total obligation topetitioner bank amounted only to P1,034,600.00 exclusive of interests, and the latter could not charge and/or

collect any interest during the time that it was closed by the Central Bank as, in fact, banks that were orderedclosed by the Central Bank ceased to be liable for the payment of interests on deposits. It also considered thedeposited check as consignation of the respondents' entire debt and that there was a valid consignation.Accordingly, the respondents' obligation to petitioner bank was declared as fully paid and/or cancelled.

On appeal by petitioner bank, the CA, in its Decision dated November 14, 1997 in CA-G.R. CV No. 42899,reversed and set aside the decision of the RTC of Makati City. On the procedural aspect, the CA found that the
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lower court erred in denying petitioner bank's motion to lift order of default. Regarding the substantive issue,the CA held that the lower court likewise erroneously declared that petitioner bank, during the time that it wasordered closed by the Central Bank, could not charge or collect interests on the respondents' loan obligation.Citing the principle of unjust enrichment, the CA posited that it was with more reason that distressed banks, likepetitioner bank, should be allowed to collect interests on the loans that they had extended to their borrowers.According to the CA, the fact that distressed banks were freed from the obligation to pay any interest due ondeposits when they were closed and ordered to stop operations did not mean that their borrowers weresimilarly freed from their contractual obligation to pay interests. It distinguished the contracts between thebanks and their depositors from those between the banks and their borrowers.

The CA declared that the deposited amount of P1,034,600.00 failed to effect a valid consignation in law

because it did not include all interests due. It ratiocinated that for a valid consignation to exist, the tender of theprincipal must be accompanied with the tender of interests which had accrued; otherwise, the said tenderwould not be effective. The CA then reversed and set aside the decision of the RTC of Makati City and entereda new one dismissing Civil Case No. 91-3090.

The subsequent facts pertain to the case now before the Court:

Upon finality of the decision of the CA in CA-G.R. CV No. 42899, declaring that there was no valid consignationand dismissing Civil Case No. 91-3090, the respondents filed with the RTC of Makati City a motion to withdrawdeposit. They averred therein that with the finality of the CA decision dismissing their complaint, they are nowwithdrawing the amount of P1,034,600.00 which they had deposited by way of consignation with the said lower

court. In addition, they alleged that their loan obligation was eventually settled with the payment of the amountofP25,000,000.00 through negotiations made with petitioner bank by the brothers James and Francisco

Gaisano as attorneys-in-fact of the respondents. Upon such payment, Corazon L. Costan, petitioner bank's 2ndAssistant Vice-President and Davao Main Branch Manager, issued on February 10, 1999 the Cancellation ofthe Real Estate Mortgage over the respondents' commercial lots. According to the respondents, there was nolonger any obstacle to the immediate release of their deposit. They prayed that they be allowed to withdraw themoney which they deposited on consignation with the said court (RTC of Makati City).

Petitioner bank opposed the respondents' motion. It alleged that as of December 31, 1998, the respondents'loan obligation stood at P28,810,330.51. Petitioner bank asserted that the deposit in question should be

released to it as part of the full payment of the respondents' obligation. It maintained that it accepted the saidconsignation; hence, the respondents could no longer withdraw the said amount.

Petitioner bank refuted the respondents' claim that there was already full payment of their obligation with thepayment by the Gaisanos of P25,000,000.00. Petitioner bank stated that it negotiated with the Gaisanos on

January 7, 1999 and the sum agreed thereon was allegedly for the payment of the respondents' obligation asof December 31, 1998 which amounted to P28,810,330.51. Petitioner bank added that during this negotiation, it

took into account and deducted from the said total obligation the amounts of P1,462,901.00, representing the

payments made by the respondents in 1990 and 1991, and P1,034,600.00, representing the deposit made by

the respondents with the RTC of Makati City. The net obligation of the respondents after deducting theseamounts stood at P26,312,828.52 and it was this amount that petitioner bank agreed to be settled with the

payment by the Gaisanos of P25,100,000.00, not P25,000,000.00 as alleged by the respondents.

Petitioner bank accused the respondents of being in bad faith in that while its negotiation with the Gaisanoshad not yet been finalized, the respondents sought to withdraw the deposit in question - which was part of theconsideration that induced petitioner bank to agree to settle the respondents' obligation with the payment bythe Gaisanos of P25,100,000.00 Petitioner bank prayed that the deposit in question be released to it in order

that it could be applied to the respondents' total loan obligation.

After consideration of the parties' respective arguments, the RTC of Makati City issued the Order dated July 31,2000 stating as follows:

Acting on the Motion to Withdraw Deposit mailed by plaintiff[s], [the respondents herein] on 26 January 1999 inDavao City with Opposition thereto filed by defendant Banco Filipino Savings and Mortgage Bank on 08February 1999.

It appears on record that the Complaint for Consignation filed by the plaintiff[s] before this Court, dated 13December 1991 and was dismissed by the Court of Appeals on 14 November 1997 which found that thedeposited amount of P1,034,600.00 did not include the interest due and was not in full satisfaction of the

defendant's claim and there was no valid tender of payment and consignation.

The dismissal of the complaint for Consignation by the Appellate Court did not absolve the obligation of plaintiffto apply the consignation to the outstanding obligation to the defendant and thus, the deposited amount maystill be applied for payment of the obligation after due hearing on the deficiency claim of the defendant againstthe plaintiff.

WHEREFORE, in view of the foregoing, the MOTION TO WITHDRAW DEPOSIT is hereby DENIED for lack ofmerit.


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SO ORDERED .5

The respondents sought the reconsideration thereof but the RTC of Makati City denied their motion in its Orderdated December 14, 2000. They then filed with the CA a Petition for Certiorari alleging grave abuse ofdiscretion on the part of the presiding judg e 6 of the said lower court in promulgating the orders denying theirmotion to withdraw deposit.

Acting on the said petition, the CA rendered the Decision dated November 12, 2001 in CA-G.R. SP No. 64475

reversing and setting aside the Orders dated July 31, 2000 and December 14, 2000 of the RTC of Makati City.It declared that the respondents had the statutory unilateral right to withdraw their deposit by way ofconsignation because there was no acceptance of the same by petitioner bank. On this point, the CA relied onArticle 1260 of the Civil Code which provides, in part, that "[b]efore the creditor has accepted the consignation,or before a judicial declaration that the consignation has been properly made, the debtor may withdraw thething or sum deposited, allowing the obligation to remain in force."

The CA stressed that petitioner bank had not "performed any prior unmistakable and deliberate actdenominating a preemptive acceptance of the deposit in partial settlement of the loan obligation. "7 The claim of"acceptance" was found to be an afterthought on the part of petitioner bank and proffered for the sole purposeof opposing the respondents' motion to withdraw deposit.

Even assuming that there was acceptance by petitioner bank, the CA opined that such acceptance mustretroact to December 5, 1991 when the deposit was judicially made. In such a case, petitioner bank'scomputation of the respondents' outstanding loan obligation would have to be modified and reducedaccordingly because the interest rate of 21% would then have to be applied to the reduced loan balance as ofDecember 5, 1991.

The CA strongly condemned the fact that the respondents' original loan of P400,000.00 in 1972 ballooned

toP28,810,330.51 as of December 31, 1998 based on petitioner bank's statement of account. The principal

amount plus interests, surcharges, insurance premiums, sheriff's and attorney's fees, notarization fees, etc., alladded up to the respondents' outstanding balance. According to the CA, the surcharges for missed monthlypayments that petitioner bank charged the respondents amounted to twice as much as the 21% interest rate,resulting in an effective interest rate of more than 60% per annum. Citing Medel v. Court of Appeals ,8 this ratewas characterized by the CA as "excessive, iniquitous, unconscionable and exorbitant" and likened petitionerbank to Shylock, the moneylender in William Shakespeare's The Merchant of Venice, who asked for a literalpound of flesh as payment for the money he lent.

The CA found as credible the respondents' claim that, on their behalf, the Gaisanos had secured a compromiseagreement with petitioner bank with the payment of P25,100,000.00 and, consequently, the mortgage over the

respondents' commercial lots was cancelled. Further, the auction sale of these properties which was scheduledon January 27, 1999 was cancelled by petitioner bank itself in its letter to the Sheriff.

The dispositive portion of the assailed decision of the CA reads:

WHEREFORE, the foregoing premises considered, the petitioners' [the respondents herein] petition forcertiorari is GRANTED. The Orders dated July 31, 2000 and December 14, 2000 of the public court in CivilCase No. 91-3090 are REVERSED and SET ASIDE, and another one entered allowing the withdrawal by thepetitioners of their deposit of P1,034,600.00 held in custodia legis with said court. No costs.

SO ORDERED .9

Petitioner bank sought the reconsideration of the said decision but the CA, in its Resolution dated April 12,2002, denied its motion. Hence, petitioner bank's recourse to the Court.

The basic contention of petitioner bank is that the CA erred in reversing the Orders dated July 31, 2000 andDecember 14, 2000 of the RTCof Makati City which had denied the respondents' motion to withdraw deposit. Petitioner bank posits that thesaid lower court did not commit grave abuse of discretion in issuing the said orders because, as stated in theCA Decision of November 14, 1997 in CA-G.R. CV No. 42899, there was no valid consignation since theamount tendered (P1,034,600.00) by the respondents did not include the interests that accrued on the principal

and, therefore, was not in full settlement of their outstanding obligation. Petitioner bank maintains that thedismissal of the respondents' complaint for consignation in Civil Case No. 91-3090 did not discharge theirobligation to petitioner bank. Hence, the deposited amount may still be applied to the payment of suchobligation.

Petitioner bank claims that it accepted the respondents' deposit on consignation as partial payment of theirobligation after the CA had declared the same to have been improperly made and ineffective to discharge therespondents of their obligation to petitioner bank. The RTC of Makati City thus did not allegedly commit graveabuse of discretion in holding that the deposited amount of P1,034,600.00 may still be applied to the payment

of their outstanding obligation of P28,810,330.51 as of December 31, 1998.
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It is likewise petitioner bank's view that respondents erroneously resorted to the remedy of certiorari in assailingthe orders of the RTC of Makati City. By filing their motion to withdraw deposit with the said lower court, therespondents allegedly recognized its jurisdiction and assuming arguendo that it committed an error in theexercise thereof, the appropriate remedy to correct the same was by ordinary appeal, not certiorari.

Petitioner bank emphasizes that it already accepted the deposit of P1,034,600.00 such that it could no longer

be withdrawn by the respondents. It reiterated that as of December 31, 1998, the respondents' total obligationwasP28,810,330.51 and when it negotiated with the Gaisanos in January 1999, it deducted therefrom the sums

ofP1,462,901.00, representing previous payments of the respondents, and P1,034,600.00, representing the

deposit in question. After these deductions, the respondents' net obligation stood at P26,312,828.52, and it was

this amount that petitioner bank agreed to be settled with the payment of P25,100,000.00 by the Gaisanos.

This allegedly showed its acceptance of the deposit in question as it was part of the consideration for thesettlement of the respondents' obligation of P28,810,330.51.

Petitioner bank strongly takes exception to the portion of the assailed CA decision comparing it to Shylock andcharacterizing the surcharges and interests as "excessive, iniquitous, unconscionable and exorbitant." It faultsthe respondents for being remiss in paying their amortization. Had they been religious in paying the same, thentheir obligation would not have reached the amount of over P28,000,000.00. Petitioner bank denies that it

delayed the foreclosure of the respondents' mortgaged properties in order to allow the loan arrearages toaccumulate. Rather, the delay was allegedly the respondents' doing as they filed with the RTC of Davao City acomplaint to enjoin the said foreclosure. Moreover, petitioner bank points out that in several cases ,10 the Courtrecognized that interests and surcharges are two entirely different things that may be simultaneously collected

in connection with loan agreements.

Petitioner bank, thus, prays for the reversal of the Decision dated November 12, 2001 and Resolution datedApril 12, 2002 of the appellate court allowing the respondents to withdraw their deposit on consignationofP1,034,600.00 held by the RTC of Makati City.

The petition is denied.

The Court shall first address the procedural issue on the propriety of respondents' filing with the CA of apetition for certiorari in assailing the Orders of the RTC of Makati City denying their motion to withdraw deposit.Petitioner bank submits that such tack was erroneous, as they should have filed an appeal. Petitioner bank'ssubmission is not correct.

A special civil action for certiorari may be instituted when any tribunal, board or officer, exercising judicial orquasi-judicial functions, has acted without or in excess of jurisdiction, or with grave abuse of discretionamounting to lack or excess of jurisdiction, and there is no appeal, nor any plain, speedy and adequate remedyin the ordinary course of law .11 To recall, in the present case, the RTC of Makati City had already rendered itsoriginal judgment in Civil Case No 91-3090 and the same was appealed to the CA. Acting on the appeal, theCA reversed the judgment of the RTC of Makati City and dismissed the respondents' complaint forconsignation. The CA decision became final and executory. Subsequently, the respondents filed the motion towithdraw deposit with the RTC of Makati City and which the latter denied in the Orders of July 31, 2000 andDecember 14, 2000. These orders, issued after the original judgment had already been rendered, wereinterlocutory and, therefore, not appealable. Since no appeal was available against such orders, therespondents properly availed of the remedy of certiorari before the CA.

On the other hand, the only substantive issue for the Court's resolution is whether the appellate court erred inreversing the Orders dated July 31, 2000 and December 14, 2000 of the RTC of Makati City which denied therespondents' motion to withdraw deposit and, consequently, allowing them to withdraw their depositofP1,034,600.00 held on consignation by the said lower court.

Consignation is the act of depositing the thing due with the court or judicial authorities whenever the creditorcannot accept or refuses to accept payment and it generally requires a prior tender of payment .12 In order thatconsignation may be effective, the debtor must show that: (1) there was a debt due; (2) the consignation of theobligation had been made because the creditor to whom tender of payment was made refused to accept it, orbecause he was absent or incapacitated, or because several persons claimed to be entitled to receive theamount due or because the title to the obligation has been lost; (3) previous notice of the consignation hadbeen given to the person interested in the performance of the obligation; (4) the amount due was placed at thedisposal of the court; and (5) after the consignation had been made, the person interested was notifiedthereof .13 As earlier mentioned, the CA, in its Decision of November 14, 1997 in CA-G.R. CV No. 42899, ruledthat there was no valid consignation because the amount tendered as payment was insufficient. In other words,the element of a valid tender of payment was not satisfied. This decision became final and executory.

The issue that now confronts the Court relates to the right of the respondents to withdraw the amount depositedwith the RTC of Makati City. Article 1260 of the Civil Code of the Philippines pertinently provides:

Art. 1260. Once the consignation has been duly made, the debtor may ask the judge to order the cancellationof the obligation.
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Before the creditor has accepted the consignation, or before a judicial confirmation that the consignation hasbeen properly made, the debtor may withdraw the thing or the sum deposited, allowing the obligation to remainin force.

This provision has been explained in this wise:

x x x The right of the debtor to withdraw the thing or amount deposited in court, depends upon whether or notthe consignation has already been accepted or judicially declared proper. Before that time, the debtor is still the

owner, and he may withdraw it; in this case, the obligation will remain in full force as before the deposit. Butonce the consignation has been accepted by the creditor or judicially declared as properly made, the debtorloses his right over the thing or amount deposited, and he cannot withdraw the same without the consent of thecreditor; if the creditor consents to the withdrawal in such case, the obligation is revived as against the debtorpersonally, but all rights of preference of the creditor over the thing and all his actions against co-debtors,guarantors and sureties are extinguished.

x x x x

x x x We believe, however, that the contrary view is more acceptable. Before the consignation has beenaccepted by the creditor or judicially declared as properly made, the debtor is still the owner of the thing o ramount deposited, and, therefore, the other parties liable for the obligation have no right to oppose hiswithdrawal of such thing or amount. The debtor merely uses his right, and unless the law expressly limits thatuse of his right, it cannot be prevented by the objections of anyone. Our law grants to the debtor the right towithdraw, without any limitation, and we should not read a non-existing limitation into the law. Although theother parties liable for the obligation would have been benefited if the consignation had been allowed tobecome effective, before that moment they have not acquired such an interest as would give them a right tooppose the exercise of the right of the debtor to withdraw the consignation.

Before the consignation has been judicially declared proper, the creditor may prevent the withdrawal by thedebtor, by accepting the consignation, even with reservations. Thus, when the amount consigned does notcover the entire obligation, the creditor may accept it, reserving his right to the balance. x x x14

Thus, under Article 1260 of the Civil Code, the debtor may withdraw, as a matter of right, the thing or amountdeposited on consignation in the following instances:

(1) Before the creditor has accepted the consignation; or

(2) Before a judicial declaration that the consignation has been properly made.

Obviously, in this case, there was no judicial declaration that the consignation had been properly made. On thecontrary, the CA declared that there was no valid consignation. What remains to be determined then is whetherpetitioner bank had already accepted the deposit in question so as to prevent the respondents from exercisingtheir right to withdraw the same.

Petitioner bank insists that it had already done so. In fact, petitioner bank avers, it took into account anddeducted the deposit in question from the respondents' outstanding obligation of P28,810,330.51 as of

December 31, 1998 when it negotiated with the Gaisanos. Deducting the deposit in question as well as thepayments made by the respondents during the period of 1990 and 1991, their net obligation stoodat P26,312,828.52. It was this amount that petitioner bank allegedly agreed to be settled with the payment

of P25,100,000.00 by the Gaisanos on behalf of the respondents.

To prove this claim, petitioner bank relies on the statement of accoun t15 prepared by its employees purportedlyshowing that the deposit in question was deducted from the respondents' outstanding obligation as ofDecember 31, 1998. This statement of account, howeve

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